Bryson & Pember
[2013] FamCA 43
FAMILY COURT OF AUSTRALIA
| BRYSON & PEMBER | [2013] FamCA 43 |
| FAMILY LAW – PROPERTY – Property settlement proceedings – Whether the right to apply to the court for an order pursuant to s 79 is of itself property – Whether the right to apply to the court for an order pursuant to s 79 is a chose in action – Where a personal right is not a chose in action and not property. FAMILY LAW – BANKRUPTCY – Where the husband declared bankrupt by his own petition – Rights of creditors – Whether the right to apply to the court for an order pursuant to s 79 vests in the bankruptcy trustee – Whether a bankrupt party has standing to bring property proceedings pursuant to s 79 – Where a party becomes bankrupt prior to family law proceedings – Where a party is discharged from bankruptcy prior to family law proceedings. FAMILY LAW – JURISDICTION – Matrimonial Cause. |
| Bankruptcy Act 1966 (Cth) s5, s58(1)(a), 58(1)(b), and 116(1)(b), Family Law Act 1975 (Cth) s4, s31, s44(3), s74 and s79 |
| Cummings v Claremont Petroleum NL (1996) 185 CLR 124 |
| APPLICANT: | Ms Bryson |
| RESPONDENT: | Mr Pember |
| FILE NUMBER: | BRC | 8546 | of | 2010 |
| DATE DELIVERED: | 6 February 2013 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 19 November 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Boe with Mr O'Brien |
| SOLICITOR FOR THE APPLICANT: | Ryan Kruger Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Sullivan SC |
| SOLICITOR FOR THE RESPONDENT: | Hopgood Ganim |
Orders
That much of the wife’s Application in a Case filed 6 September, 2012, that is framed by the two points of argument:-
(i)That the husband cannot apply for orders altering the property interests of the parties because the right to make such an application was a right that vested in his trustee in bankruptcy upon his bankruptcy and the right has not re-vested in him; and/or
(ii)That the husband does not have locus standi to bring the application for alteration of the parties interests in property is dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bryson & Pember has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
.
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 8546 of 2010
| Ms Bryson |
Applicant
And
| Mr Pember |
Respondent
REASONS FOR JUDGMENT
Mr Pember and Ms Bryson married in 1996 and separated in or around September/October 2009. A decree nisi of dissolution of their marriage became absolute on 13 May 2011.
On 4 October 2011, Ms Bryson, who I shall refer to as “the wife”, filed an Initiating Application in this Court seeking parenting orders in respect of their three children. On 14 March 2012, Mr Pember, who I shall refer to as “the husband”, filed a Response to the wife’s parenting orders application. On 23 March 2012, the wife filed an Amended Initiating Application for parenting orders. On 9 May 2012, the husband filed an Amended Response to the wife’s parenting orders application. In that Amended Response, the husband also cross-applied for orders for property settlement pursuant to s 79 of the Family Law Act 1975 (“the FLA”) and for spousal maintenance pursuant to s 74 of the FLA.
The husband’s proceedings for property settlement and spousal maintenance were commenced by that cross-application just within the period in which they could be commenced without the statutory requirement to first obtain the leave of the Court. (s 44(3) FLA)
A few other facts are relevant to the disposition of the immediate issue.
In March 2009, the husband was made bankrupt by his own debtor’s petition. He was discharged from that bankruptcy in March 2012, just a few months before he commenced his proceedings for property settlement.
In an Application in a Case filed 6 September 2012, the wife applied to have the husband’s application for orders pursuant to s 79 of the FLA dismissed. The matter came before me in a duty list on 19 November 2012. When the matter was reached late in the afternoon of that day, after some discussion with counsel, there was, I understood, consensus that the Court should proceed at that time to determine that part of the wife’s application prefaced on two particular points of argument. Those were:
(i)That the husband cannot apply for orders altering the property interests of the parties because the right to make such an application was a right that vested in his trustee in bankruptcy upon his bankruptcy and the right has not re-vested in him; and/or
(ii)That the husband does not have locus standi to bring the application for alteration of the parties interests in property.
Did the husband’s right to make application for orders altering the parties’ interests in property vest, on his bankruptcy, in his trustee?
Pursuant to s 79(1) of the FLA, this Court has power to make such orders as it considers appropriate in property settlement proceedings.
By s 4 of the FLA, “property settlement proceedings” means, relevantly:
(a) in relation to the parties to a marriage – proceedings with respect to:
(i) the property of the parties or either of them; or
(ii) the vested bankruptcy property in relation to a bankrupt party to the marriage;
In the case of proceedings with respect to property to which one or both of the parties to a marriage is or are entitled, the Court has the power to alter those interests in the property. That power includes the power to make an order for a settlement of property in substitution for any interest in the property and an order requiring either or both of the parties to the marriage to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the Court determines. (s 79(1)(a), (c) and (d)(i))
In the case of proceedings with respect to the vested bankruptcy property of a bankrupt party to the marriage, the Court has the power to alter the interests of the bankruptcy trustee in the vested bankruptcy property. That power includes the power to make an order for a settlement of property in substitution for any interest in the property and an order requiring either or both of the parties to the marriage or the bankruptcy trustee to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as this Court determines. (s 79(1)(b), (c) and (d)(i) and (ii))
This Court’s jurisdiction to exercise the powers referred to in paragraphs [9] and [10] is also conferred by the same statute, the FLA. Section 31 confers jurisdiction with respect to matters arising under the FLA in “matrimonial causes” and that term is defined in s 4 to include proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings arising out of the marital relationship. (see (ca)(i) of that s 4 definition) The definition also includes proceedings between a party to a marriage and the bankruptcy trustee of a bankrupt party to the marriage with respect to any vested bankruptcy property in relation to the bankrupt party, being proceedings arising out of the marital relationship. (see (cb)(i),(ii) and (iii) of that s 4 definition)
The power to make orders requiring the bankruptcy trustee of a bankrupt party to a marriage to settle upon, or transfer to either or both of the parties to the marriage, or a child of the marriage, some or all of the property of the bankrupt spouse that vested in the bankruptcy trustee pursuant to the provisions of the Bankruptcy Act 1966 (“the BA”) was conferred on this Court by the Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth)(“the Amendment Act”). The Amendment Act amended the FLA and the BA in a number of ways. The Explanatory Memorandum said these amendments “would address longstanding issues concerning the interaction between bankruptcy and family law which have created uncertainty as to the competing rights of creditors and the non-bankrupt spouse.”[1]
[1] Paragraph 8 under the Sub-heading ‘Policy Objectives’
The Explanatory Memorandum went on to say:
There are a number of difficulties which can arise when bankruptcy and family law issues and/or proceedings exist at the same time.[2]
…Different outcomes result depending upon the order in which events occur (those events include separation, bankruptcy and distribution of property by the trustee in bankruptcy).[3]
…The amendments proposed in this Bill will address these issues by clarifying the rights of the bankruptcy trustee and the non-bankrupt spouse. Generally, the amendments will enable concurrent bankruptcy and family law proceedings to be brought together to ensure all the issues are dealt with at the same time.[4]
[2] Paragraph 10 under the Sub-heading ‘Interaction between family law and bankruptcy’
[3] Paragraph 13 under that same Sub-heading
[4] Paragraph 14 under that same Sub-heading
As counsel for the wife alluded to in written submissions, the “complexity” of the issue to be determined in this case arises in circumstances where the husband commenced proceedings for alteration of property interests after he had already been discharged from bankruptcy, and where the wife had not previously commenced any such proceedings herself during the husband’s bankruptcy or prior to his bankruptcy, with such proceedings not having been finally determined before the husband’s bankruptcy. It is also to be determined where, notwithstanding the clearly expressed intent of the legislature in enacting the Amendment Act, there is still no specific legislative provision clarifying the particular point in issue in this case. I shall return to this point, that I consider important in my determination, later.
By operation of s 58(1)(a) of the Bankruptcy Act 1966 (“the BA”) “the property of a bankrupt” vests in his or her trustee in bankruptcy at the moment the person becomes a bankrupt.
The term “property” is broadly defined in s 5 of the BA as:
Real or personal property of every description, whether situated in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property.
The phrase “the property of the bankrupt”, in relation to a bankrupt, is defined in s 5 of the BA to include, relevantly:
... any rights and powers in relation to [the property divisible among the bankrupt's creditors] that would have been exercisable by the bankrupt if he or she had not become a bankrupt;
Relevantly, for the purposes of determining the issue before the Court, property divisible among the creditors of a bankrupt is defined in s 116(1)(b) of the BA to include the capacity to exercise and to take proceedings for exercising all such powers over or in respect of property as might have been exercised by the bankrupt for his own benefit at or before the commencement of the bankruptcy.
Of course, by s 58(1)(a) of the BA, any interest the husband had in property, owned in his own right, jointly with his wife or jointly with any third party, either at law or in equity, vested in his bankruptcy trustee on his bankruptcy.
But the husband also had a right, extant at the time he became bankrupt (even though he and the wife had not separated at that time), conferred upon him by the provisions of the FLA, to commence proceedings against his former wife, for orders pursuant to s 79 of the FLA altering any interest the wife had in property, owned in her own right, jointly with him or jointly with any third party, either at law or in equity. As discussed already, the Court’s powers in such proceedings include making orders that the wife transfer or settle property (including by paying money) upon the husband, subject, of course, to being satisfied that such orders are just and equitable (s 79(2) FLA) and appropriate (s 79(1) FLA), taking into account certain matters set out in s 79(4) of the FLA.
The filing of an application for alteration of property interests pursuant to s 79 does not of itself create, or give rise to interests in property in the applicant spouse that do not already exist. Nor does it change any interests that already exist or the way in which they are held.[5]
[5]For example, interests in freehold land held as joint tenants do not automatically become held as tenants in common.
In this case, although the husband applies for orders that might result, depending on all the particular factual circumstances, in him receiving from the wife payment of cash and/or a transfer of an interest she has in property, he has no interest in such cash or other property simply arising from the filing of an application for orders pursuant to s. 79. He will only obtain an interest on the pronouncement of orders that provide for that. Only on the pronouncement of such orders does an interest in such property devolve upon him.
Of course, by operation of s 58(1)(b) of the BA, should a party to s 79 FLA property settlement proceedings be an undischarged bankrupt at the time such orders are made, and an interest in property thereby devolves upon him, any such interest in property, being ‘after-acquired property of the bankrupt’, immediately vests in his bankruptcy trustee.
The question for determination in this matter is whether the husband’s right to make an application pursuant to s 79 of the FLA for orders that potentially could result in some of the wife’s property devolving upon him is in itself ‘property’ within the meaning of that term as it is used in s 58(1)(a) of the BA.
Counsel for the wife argued that it is. They argued that it is “a chose in action in respect of property.” By implication, their submission was that “a chose in action in respect of property” is itself property.
Is the right to make an application for orders pursuant to s 79 of the FLA “a chose in action” and if it is, is it therefore ‘property’ as that term is defined in the BA?
In Loxton v Moir (1914)18 CLR 360 at 379 Rich J of the High Court said:
The phrase “chose in action” is used in different senses, but its primary sense is that of a right enforceable by an action. It may also be used to describe the right of action itself, when considered as part of the property of the person entitled to sue. A right to sue for a sum of money is a chose in action, and it is a proprietary right.
The meaning of the phrase “a thing in action”, which has been held to be the same as “a chose in action”[6], was also more recently considered in Krischell Pty Ltd v Nilant & Ors (2006) 32 WAR 540 by the Western Australian Court of Appeal. Their Honours’ careful consideration was again discussed by Barker J of the Federal Court in the very recent decision of MG Corrosion Consultants Pty Ltd v Gilmour and Another (2012) 202 FCR 354.
[6]See Carob Industries Pty Ltd (in Liq) v Simto Pty Ltd (2000) 23 WAR 515 at 520; Krischell Pty Ltd v Nilant & Ors (2006) 32 WAR 540 and MG Corrosion Consultants Pty Ltd v Gilmour and Another (2012) 202 FCR 354 at [11] on p357
In Krishell , McLure JA cited the passage from Rich J’s reasons for judgment in Loxton v Muir (that I have quoted in paragraph [27] above) as support for the view that ‘a chose in action’ is a personal right of property which can only be claimed or enforced by action as distinct from taking physical possession. Indeed, that is the exact meaning given to the term in the text Meagher, Gummow and Lehane’s Equity Doctrines & Remedies 4th Edition (Butterworths 2002) at 6-005. Her Honour, McLure JA, went on to observe that Starke JG, in the text Assignments of Choses in Action in Australia (Butterworths, 1972) at page 3, opined that an essential criterion of a chose in action is that the right be of a proprietary character and that a personal right is not a chose in action because it is not property.
In Krishell, Buss JA referred to Halsbury’s Laws of England, 4th Ed, 2003 Reissue , vol 6 paragraph 1 and quoted as follows:
The expression ‘chose in action’ or ‘thing in action’ in the literal sense means a thing recoverable by action, as contrasted with a chose in possession, which is a thing of which a person may have not only ownership but also actual physical possession. The meaning of the expression ‘chose in action’ or ‘thing in action’ has varied from time to time, but is now used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession. It is used in respect of both corporeal and incorporeal personal property which is not in possession.
I agree with Barker J’s view[7] that Buss JA appears to have accepted that statement of the meaning of ‘chose in action’ or ‘thing in action’.
[7]In MG Corrosion Consultants Pty Ltd v Gilmour and Another (2012) 202 FCR 354 at [14] on page 358
In Krishell, Wheeler JA also referred to Starke’s text, as well as Halsbury’s statement of the meaning of ‘chose in action’, and observed that the expression extends only to rights “of a proprietorial or quasi-proprietorial nature which are claimable or enforceable by action”. His Honour said:
[A] right of litigation may be considered to be property if it can be characterised as a “chose in action”, that being a species of property. Not all rights to take action are choses in action.
The view that all choses in action are ‘property’, whilst there exist rights to take action that are not choses in action, does appear at odds with what McClure JA pointed out[8] “is suggested” in Meagher, Gummow and Lehane’s Equity Doctrines and Remedies[9] “that all bare rights to litigate are choses in action regardless of whether or not they are property”.
[8] In Krishell at ]75]
[9]Supra, at 6-480
Whilst the passage that her Honour referred to in the learned text does appear to support a view that the authors suggest that all rights to litigate are choses in action, but that all choses in action are not necessarily property, such a suggestion, if that is what was meant to be suggested, in my view, appears at odds with the learned authors’ own definition that I refer to in paragraph [27] hereof. It appears also to be at odds with Starke J’s inclusion of choses in action in his Honour’s definition of ‘property’ in his reasons for judgment in Minister of State for the Army & Dalziel[10]. Yet, on the other hand, it appears to get support from the majority judges in the High Court’s decision in Cummings v Claremont Petroleum NL.[11]
[10](1944) 68 CLR 261 at page 290
[11](1996) 185 CLR 124 at 133 where Brennan CJ, Gaudron and HcHugh JJ assert, with reference to a previous High Court decision of Georgiadis v Australian & Overseas Telecommunications Corporation (1994) 179 CLR 29, that “a chose in action may be the property of the person entitled to enforce it.” What, in Georgiadis, was determined to be ‘property’ within the meaning of that term as used in s 51(xxxi) of the Constitution, was a person’s ‘right to bring an action for damages for negligence” for personal injury. By their Honours’ reference to that case as authority for the point they made in Cummings, they appear to be accepting that the bare right to litigate for damages for negligence is a chose in action, but also that not all choses in action are necessarily property.
Indeed, Barker J points out that the discussion in the texts and cases as to what is a thing, or chose in action reflects “a level of puzzlement with rules that appear to include some actions for recovery within the category of things or choses in action, while denying other actions that property status.”[12] I respectfully agree with his Honour’s observation.
[12]In MG Corrosion (supra) at [16] on 358
In that case, Barker J was having to determine whether particular causes of action, one a statutory right to apply for compensation under the Corporations Act 2001, and one an action in equity for compensation or an account of profits for breach of fiduciary duties, were things, or choses in action and thus ‘property’ within the definition of that term in s 9 of the Corporations Act 2001(Cth). He went on to find that they were not. In doing so, he placed particular weight on the fact that they were incapable of assignment. His Honour did this having already noted McClure JA’s observation in Krishell that assignability is not an essential characteristic of a right of property but that a proprietary right must nevertheless be capable in its nature of assumption by third parties.[13]
[13]See MG Corrosion Consultants Pty Ltd v Gilmour and Another( supra) at [12] on page 358
The right of a husband, statutorily created, to make an application for property adjustment orders under s 79 of the FLA, similarly, cannot be assigned. To the extent that the husband only seeks orders that the wife settle or transfer some of her ‘property’ on, or to the husband because, in the circumstances, that is “appropriate” and “just and equitable”, I do not consider it to be a chose, or thing in action. The husband is not seeking to enforce or claim an existing corporeal or incorporeal interest. I consider the husband’s right to be a right or a cause of action, that is personal rather than proprietary in nature. Accordingly, I am of the view that the right of the husband to bring a s 79 FLA application, not being a chose in action, did not vest in his trustee on his bankruptcy.
If I am wrong and it is a chose, or thing in action, then I consider that the preponderance of authority and learned opinion appears to be that choses in action are property. But even if that is the case, I am still satisfied that the right did not vest in the husband’s trustee in bankruptcy on the husband’s bankruptcy.
There is a long line of judicial decisions that have determined or accepted that there are certain causes of action personal to the bankrupt, whether they be classified as choses in action or not, that do not vest in the bankrupt’s trustee.[14] As can be seen, some of those decisions are decisions of this Court and the Full Court of this Court that actually determined the very same point that is in issue before me. They determined that the right to bring a property settlement application does not vest in the bankrupt party’s trustee on bankruptcy. The Full Court of the Federal Court also accepted that same point in DC of T v Swain.
[14]Coffey v Bennett [1961] VR 264; Luxton v Luxton [1968] VR 540; Page and Page (No 2) (1982) FLC 91-241, Deputy Commissioner of Taxation v Swain (1988) 20 FCR 507 at 514; Reed v Reed; Grellman (Intervener) (1990) FLC 92-105; Heath v Tang (1993) 4 All ER 694 at 697; Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 136; O’Neill v O’Neill (1998) FLC 92-811
Indeed, in O’Neill,[15] the Full Court of this Court said
[I]t would appear to remain good law that a bankrupt spouse may initiate and prosecute property settlement proceedings during the course of his or her bankruptcy.
[15](Supra) at [88}
Clearly, the Full Court, by implication, thereby rejected the proposition that the right to make a property settlement application was property that vested in a bankrupt spouse’s trustee. It follows, I accept, that a spouse, discharged from bankruptcy, may also initiate and prosecute such proceedings.
Clearly conscious of the impact of that decision in O’Neill and that line of cases on the wife’s argument, counsel for the wife submitted that the changes made to the property settlement application and determination process by the Amendment Act in 2005 meant that those decisions were no longer applicable.
I respectfully reject that submission. It was counsel for the wife themselves who pointed out that the amendments left the legislation silent on the very point in issue. Noting that the question of the bankrupt spouse’s right to initiate and maintain property settlement proceedings had been the subject of a number of decisions of this Court over the years and conscious of the fact that the Explanatory Memorandum to the Amendment Act included the statements that I have already quoted in these reasons, I can only conclude that the absence of any inclusion of a statutory provision precluding a bankrupt spouse or a discharged bankrupt spouse from initiating and prosecuting a property settlement application was an intended omission. Had the legislature considered that, as a matter of policy, to be the appropriate outcome, it would, I expect, have expressly legislated for that outcome.
The High Court recently confirmed in Stanford v Stanford [2012] HCA 52 that s 79 of the FLA cannot be read so as to be limited in its reach only to the alteration of property interests of parties to a marriage that has broken down. Accordingly, the right of a party to a marriage to apply for orders pursuant to s 79 of the FLA extends even to parties to intact marriages. Therefore, the fallacy of the point contended for by counsel for the wife can be seen by considering the case of the couple happily married for many years, during which one or both of them unfortunately becomes bankrupt. Even if the bankrupt spouse was discharged from their bankruptcy many years before a separation, the logical extension of the wife’s argument would be that the party who had at an earlier point during the marriage been bankrupt and later discharged has no right to bring an application pursuant to s 79, no matter how much time had expired after their discharge from bankruptcy. It is easy to see how, in cases like that, such an outcome would be unjust and inequitable. I can not see in the amended legislation the intent of the legislature to prevent a spouse in such circumstances from bringing an application for property settlement.
Finally, I consider I should deal with one last part of the case presented for the wife. The submission was made that the right to bring s 79 proceedings answers the description of ‘property divisible amongst creditors’ defined by the wording in subparagraph (b) of s 116(1) of the BA (referred to by me in paragraph [18] of these reasons). However, as Senior Counsel for the husband pointed out, that submission completely ignores the fact that the point has been dealt with before by the High Court in Cummings[16]. The majority judges in that case rejected a similar argument and confirmed that the powers referred to are powers “which are familiar to all conveyancers and are powers property so called”; as was identified by Farwell J in In re Rose; Trustee of the Property of E T Rose v Rose.[17] Their Honours went on to say:
In other words, the powers referred to are authorities to dispose of property or interests in property for the benefit of the donee of the power or of some other person.
[16] (Supra) at page 133
[17] [1904] 2 Ch 348 at 352
Just as in Cummings, in the case under consideration, there is no such “power” the husband could exercise, or in respect of which he could take proceedings. Accordingly, I respectfully also reject that submission made on behalf of the wife.
Does the husband have standing to bring the s 79 Application?
As I understood the submissions of counsel for the wife, this point is really one that would simply follow success on the first part of the argument that I have now determined. If the husband’s right to bring an application pursuant to s 79 of the FLA vested in the trustee on the husband’s bankruptcy, it did not revest in the husband on his discharge from bankruptcy and, accordingly, he would have no right to bring the s 79 application upon his discharge, hence no standing to do so.
I did not understand counsel for the wife to contend that regardless of the outcome of the argument on the first point, the husband has no standing.
As such, having determined the argument on the first point in issue against the wife, the argument that the husband has no standing to bring the application pursuant to s 79 simply falls away.
Accordingly, that much of the wife’s Application in a Case filed 6 September, 2012, that is framed by the two points of argument set out in paragraph [6] of these reasons is dismissed. I shall hear submissions from the parties as to how the balance of the matters remaining in dispute on an interim basis shall be disposed of.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 6 February 2013.
Associate:
Date: 6 February 2013
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